Two and a half years after Israel's Sovereign Wealth Fund, known as the Citizens' Fund, began operations, the fund has accrued NIS 7.5 billion. The Israel Tax Authority reports that as of the end of 2024 total levies collected on gas profits and excess profits on natural resources amounted to NIS 7.5 billion, of which NIS 6.1 billion is in final levies (amounts that cannot be appealed). In total, nearly NIS 1 billion was collected in 2024, compared with about NIS 2 billion in 2023. About 1.5 billion shekels became final in 2024, compared to about NIS 2.6 billion in 2023.
The decrease in levy collection in 2024 compared with 2023 is due to the continued decline in world commodity prices after peak prices in 2022 (due to the Russia-Ukraine war), as well as high and planned investments made in 2024 in one of the projects that reduced levy collection.
Types of taxes collected by the state
The local gas partnerships pay several types of taxes to the state on their income and gas production. Firstly there are royalties at a rate of 12.5%, set by the Petroleum Law from the moment production in the reservoir begins. The collection and control of royalties is managed by the Royalties Division of the Ministry of Energy and the funds are transferred directly to the Ministry of Finance. Secondly, there is corporate tax (income tax) at a rate of 23% of the profit, determined according to the Income Tax Ordinance and administered by the Tax Authority - it is also transferred directly to the Ministry of Finance. Thirdly, there is the excess profits tax from natural resources (known as the Sheshinsky tax), at a rate of 20%-46.8%, after a 150% return on investment. This is a special tax that was determined following the Sheshinsky Committee report, which is administered by the Tax Authority and transferred to the Citizens' Fund managed by the Bank of Israel.
The fund was established and began operating in mid-2022 after more than NIS 1 billion had accumulated in its coffers. The purpose of the fund is to manage the state's revenue from the levy on profits from natural resources from a long-term economic perspective in order to generate profit and to enable the continued existence of the fund for future generations. In addition to levies on gas profits and excess profits from natural resources designated for the fund for Israeli citizens, energy rights holders and holders of rights to exploit natural resources also pay income tax and royalties, which are paid into the state budget on an ongoing basis.
The Tax Authority transfers the levies collected to the fund on a quarterly basis to the Ministry of Finance accountant general, who manages the levies for an interim period until they are finalized, before transferring the completed levies to the Citizens' Fund once a quarter, together with the investment profits (or minus the losses), after they have been converted by the Bank of Israel to an amount in foreign currency.
Published by Globes, Israel business news - en.globes.co.il - on January 15, 2025.
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